Subject: Re: Charging the Charger
From: Ben Tilly <btilly@gmail.com>
Date: Tue, 17 May 2005 19:36:52 -0700

 Tue, 17 May 2005 19:36:52 -0700
On 5/17/05, Brian Behlendorf <brian@collab.net> wrote:
> On Tue, 17 May 2005, Anderson, Kelly wrote:
> > I beg to differ... but just a little bit. Proprietary software does
> > enjoy AN advantage when it comes to support. And that is that the
> > licensing fees from selling the software can initially bootstrap the
> > support organization. There is no such source of bootstrapping capital
> > for a support organization to support, say Open Office, other than
> > perhaps by going public as RedHat did, or doing a round of VC funding.
> > In either case, it's much more difficult to have a pure support
> > organization.
> 
> But the licensing fees don't start rolling in until there's a product
> built, marketed, and sold - so what bootstraps that?

Get a consulting contract to build the software that you'll sell
elsewhere.  Or get consulting contracts to build stuff that
relates in some way, and use the money and experience to help
built what you want to build.

> It seems to me that companies intending to provide support for existing
> Open Source software have a lower barrier to market entry than companies
> intending to sell licensing contracts and support for products yet to be
> built.  I can incorporate a new company on day one, and on day two start
> selling support contracts for OSS products I and my co-founders are
> familiar with, without spending for much more than the cost of a web site
> and phone number.  Selling support contracts does not require a big team,
> even for 24/7 coverage - I could start with just 2-3 people and just a
> handful of customers to get to breakeven, and then hire up as my customer
> base grows. Whereas, developing a substantial software product requires a
> non-trivial team (a couple of dozen, if you include QA, docs/packaging,
> product management, and competitive marketing), and pure speculation that
> you'll get to a sustainable level of sales.

Note, EXISTING Open Source software.

I'd say that it might be easier for the first company supporting some
new proprietary software to get launched.  It is easier for the second
company to support some new open source software to get launched.

The reason why I said "might be" is that with open source you have
the strategy of writing it for a consulting gig and releasing that, with
the hope of scaring up more consulting gigs supporting that
software.  There are plenty of small businesses that have done
exactly that, for instance Zope.

This does not tend to lead to the kind of support contracts that
people might be thinking of.  I'd attribute that mostly to the fact that
the nature of consulting work makes it natural to create a niche
product with lots of customizability (so you can tailor different
solutions to each customer).  However it does lead to a lot of
work where you make money supporting the product.

Cheers,
Ben